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									                                                      USDA Foreign Agricultural Service

                                                          GAIN Report
                                                     Global Agriculture Information Network
Template Version 2.09




Required Report - public distribution
                                                                            Date: 2/27/2004
                                                            GAIN Report Number: KS4011
KS4011
Korea, Republic of
Food Processing Ingredients Sector
Food Processing Ingredients Sector
2004




Approved by:
Marcus E. Lower, ATO Director
Agriculture Trade Office, Seoul
Prepared by:
Seh Won KIM, Ag. Marketing Specialist


Report Highlights:
Korea is a major importer of raw materials and ingredients for food processing. Over 70
percent of food products in Korea are imported. The size of the Korean food processing
industry is estimated at $35.7 billion for 2002, up 8 percent from $33 billion in 2001. U.S.
raw materials and ingredients for use in food processing have a strong opportunity in Korea.




                                                                        Includes PSD Changes: No
                                                                         Includes Trade Matrix: No
                                                                               Unscheduled Report
                                                                                  Seoul ATO [KS2]
                                                                                              [KS]
GAIN Report - KS4011                                                                                  Page 2 of 17

                                          Table of Contents
SECTION I. Market Summary .................................................................................. 3
SECTION II. ROAD MAP FOR MARKET ENTRY .......................................................... 4
 A.    ENTRY STRATEGY ............................................................................................ 4
 B. MARKET STRUCTURE ............................................................................................ 5
 C. COMPANY PROFILES ............................................................................................. 6
 D. SECTOR TRENDS ................................................................................................. 7
Food Processing Sector .......................................................................................... 8
   Food Ingredient Processing .................................................................................... 9
   Confectionary and Bakery ...................................................................................... 9
   Non-alcoholic Beverages Processing ...................................................................... 10
   Dairy Processing ................................................................................................. 10
   Meat Processing .................................................................................................. 10
   Seafood Processing ............................................................................................. 10
SECTION III. COMPETITION ..................................................................................11
SECTION IV. BEST PROSPECTS ..............................................................................14
SECTION V. KEY CONTACTS AND FURTHER INFORMATION ....................................15




UNCLASSIFIED                                                           USDA Foreign Agricultural Service
 GAIN Report - KS4011                                                                          Page 3 of 17

 SECTION I. Market Summary

 The gross output of the Korean food processing industry, including beverages and seafood, is
 estimated at $35.7 billion (42.9 trillion Won, $1 = 1,200 Won) for 2002, up 8 percent from
 $33 billion in 2001. The sector is composed of about 7,600 enterprises and about 183,000
 employees. Sectoral growth of 3-5 percent annually is expected for the foreseeable future.

 The total imports of agricultural, food, fishery and forestry products in 2003 are estimated at
 $13.2 billion from the world. With $3.5 billion in sales, the U.S. accounted for 26 percent of
 Korean imports. Due to the lack of arable farmland, high production costs and growing food
 requirements, Korea has been a major importer of basic foodstuffs for further processing.
 Korea imports about 70 percent of total agricultural product needs. The U.S., China,
 European Union (EU) and Australia are the major agricultural exporters to Korea. With a
 territory about the size of the state of Indiana and population estimated at 48 million, Korea
 was the 5th largest market for U.S. agriculture in 2003.

 Output of Food Processing Industry by Sector in 2002




                                             Fruit & Vegetable        Sugar manufacturing
                                            Processing (2.8%)               (1.9%)

                                Fats & Oils                              Starch & Sweeteners
                            manufacturing (3.0%)                         manufacturing (1.8%)

            C ocoa & sugar                                          Meat processing
         confectionery (3.0%)                                          (10.9%)
                                                                                      Grain processing
                                                                                          (10.3%)
        Noodles and similar
         products (4.0%)


 Seasonings, spices &                                                                       Dairy & Ice cream
 Food additives (5.6%)                                                                            (9.9%)



   Bread & Grain
preparations (5.7%)                                                                        Feed processing (9.6%)


     C offee, tea, soup &
     other foods (5.9%)
                                                                       Alcoholic beverages
                                                                             (8.5%)
                  Fish and marine        Non-alcoholic beverages
                  products (6.9%)                (7.4%)




 Except for rice, which has a large surplus, Korea imports a broad range of basic, intermediate
 and semi processed agricultural products. Corn, soybeans, wheat, essential oils, frozen



 UNCLASSIFIED                                                      USDA Foreign Agricultural Service
GAIN Report - KS4011                                                             Page 4 of 17

concentrated orange juice, turkey meat, duck meat, almonds, walnuts, powdered milk, whey
powder and beef tallow, seafood, processed fruits and vegetables, coffee, potato products,
vegetable oils and cocoa products exemplify the raw materials and ingredients imported into
Korea for use in food processing. U.S. suppliers have a strong opportunity to export inputs
for use in food processing in Korea.

The United States is the largest supplier of agricultural, food and fishery products to Korea,
with a 27.9 percent market share in 2002, followed by China with 19.7 percent, the EU with
11.2 percent and Australia with 8.9 percent. These four countries account for about 68
percent of the total Korean agricultural, food and fishery product imports in 2002.

Table 1. Imports of Agricultural, Food and Seafood in Korea: 2002 ($million)
Sector        Total U.S.               China          EU           Australia           Others
               Value   Value   Share Value     Share Value     Share Value     Share Value       Share
Bulk           2,749   772     28.1    844     30.7    43      1.5     464     16.9    626       22.8
Intermediate 3,142     842     26.8    312     9.9     382     12.1    233     7.4     1,373 43.7
Consumer       3,474   1,346 38.8      337     9.7     771     20.5    301     8.7     719       20.7
Seafood        1,820   165     9.0     711     39.1    55      3.0     1.4     0.1     888       48.8
Total          11,185 3,125 27.9       2,204 19.7      1,251 11.2      999.4 8.9       3,606 32.2
Note: Forest products excluded
Source: Korea Trade Information Service, compiled by ATO Seoul


Table 2. Advantages and Challenges for U.S. Agricultural, Food and Fishery Products.
Advantages                                    Challenges
Diminishing resistance to imported foods      Tariffs of food ingredients are generally
                                              higher than those of high value products
Confidence in U.S. foods                      U.S. prices are generally higher than those of
                                              competitors' food ingredients
Almost all agricultural and food products are Occasional sanitary/phytosanitary issues
importable                                    cause suspension of imports
Equal or superior quality to domestic and     Food safety concerns and biotech issues
competitors' products
Increasing affluence of Koreans               Frequent changes in food regulations
Young generation is becoming more             Onerous inspection/Customs clearance
Westernized                                   procedures
Weakening dollar vis-à-vis the Won makes      High test fees for chemical residues in grains
U.S. products more price competitive


SECTION II. ROAD MAP FOR MARKET ENTRY

   A. ENTRY STRATEGY

U.S. agricultural, food and fishery products are generally considered by Koreans as high
quality but the prices are generally higher than those of U.S. competitors. When considering
the Korean market, exporters should conduct preliminary research to determine if the market
is appropriate for the product. Possible sources of market information include Korean
importers, U.S. state departments of agriculture, the U.S. Agricultural Trade Office (ATO)
website, and the U.S. Department of Commerce. Lists of Korean importers, by product, can


UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                              Page 5 of 17

be obtained from the U.S. Agricultural Trade Office, or through the U.S. Department of
Agriculture (USDA)/Foreign Agricultural Service in Washington, D.C. The next step might
include sending catalogues, brochures, product samples, and price lists to prospective
importers as a way of introducing the company and products.

Once contact is established, it is advisable to visit the importer(s) in person, which will
increase the seller's credibility with the Korean importer and give an opportunity to see the
Korean market first hand. In Korea the clichés about "seeing is believing" and "one visit is
worth a 1,000 faxes" are especially true. There is no substitute for face-to-face meetings.
The supplier or exporter should bring samples as well as product and company brochures,
price lists, shipping dates, supply data, and any other information needed for negotiating a
contract. While information in English is acceptable, having it in Korean is helpful and
demonstrates serious interest in the market. A general overview of the firm in Korean is a
good starting point.

Another way of finding potential importers is to participate in local food shows to showcase
your products to a larger audience. Many Korean importers attending shows are seeking to
establish reliable long-term trading relationships. Show participation enhances initial
contacts with importers, agents, wholesalers, distributors, retailers and others in the food
and beverage industry. A list of Korean trade shows is available from the ATO. See Section
V for contact information.

American companies should be sensitive to the uniqueness of the Korean market. An
approach or a product that was successful in another market does not mean it will be
applicable to Korea. It will be necessary to review the product design, packaging and market
approach for the Korean situation, requirements and tastes. A well-developed relationship
with a Korean importer is an asset when determining how to best market a product.

For exporters of high-value niche market products, the Mid-America International Agri-
Trade Council (MIATCO) offers a Distributor Development Service (DDS), which provides a
series of cost-effective services designed to assist U.S. suppliers with specific information on
whether and how to approach the Korean market. MIATCO will also assist U.S. food
companies in establishing and solidifying contacts in the Korean import, distribution, retail,
food service, or food processing sectors through trade servicing and in-market assistance.
See Section V for MIATCO's contact information.

Finally, in the Korean market, never take anything for granted. Be ready for the
unexpected. Just because the first container cleared customs, does not mean the second
one will. Be open for new information, attentive and patient.

B. MARKET STRUCTURE
The chart below gives an overview of the usual distribution channel for imported food
ingredients from U.S. exporters to Korean food processors.




US exporter                                                                  --   Retail

                --   Importer/      --   Distributor     --   Food
                     agent                                    processor
                                                                             --   HRI


UNCLASSIFIED                                             USDA Foreign Agricultural Service
GAIN Report - KS4011                                                                    Page 6 of 17


Large food processing companies generally prefer to buy food ingredients directly from
overseas suppliers when the quantities are large. These large companies often prefer to
purchase from local importers, agents or distributors when the quantities are small.

C. COMPANY PROFILES

Below is a table with profiles of the major Korean food manufacturing companies.
Information includes company sales, the main end-use channels, production location,
procurement channels and contacts.

Table 3. Company Profiles
Company               Sales in     End-use   Plant Location        Procurement        Contacts
Product types         2002         Channel   (No. of Plants)       Channels
                      ($Million)
Nong Shim                978       Retail    Korea (5)             Direct and         *P. 02-820-7114
(Instant noodles,                  and HRI   China (2)             other importers    *F. 02-820-7024
snacks)                                                                               *W. nongshim.co.kr
Lotte Chilsung           969       Retail    Korea (2)             Direct and         P. 02-3479-9114
(Soft drinks,                      and HRI                         other importers    F. 02-535-8619
juices, milk)                                                                         W. lottechilsung.co.kr
CJ                       693       Retail    Korea(10)             Direct and         P. 726-8114
(sugar, spices,                    and HRI   Indonesia (3)         other importers    F. 02-726-8049
seasonings, wheat                            Philippines (1)                          W. cheiljedang.com
flour, edible oils,                          Australia (1)
meat processing)                             Vietnam (1)
Lotte                    581       Retail    Korea (4)             Direct and         P. 02-670-6114
Confectionery                      and HRI   U.S. (1)              other importers    F. 02-6672-6600
(Confectionery,                              Vietnam (1)                              W. lotteconf.co.kr
chewing gum, ice                             Russia (1)
cream)                                       China (1)
Dong Suh Foods           484       Retail    Korea (6)             Direct and         P. 02-3271-0114
(Coffee, tea,                      and HRI                         other importers    F. 02-714-9414
honey, snacks)                                                                        W. dongsuh.co.kr
Lotte Ham                474       Retail    Korea (3)             Direct and other   P. 02-3479-5314
(Pork, ham)                        and HRI                         importers          F. 02-3479-5100
                                                                                      W. Lottehammilk.co.kr
Haitai Beverage          366       Retail    Korea (3)             Direct and         P. 02-3219-7114
(Soft drinks,                      and HRI                         other importers    F. 02-651-9084
juices)                                                                               W. htb.co.kr
Haitai                   364       Retail    Korea (2)             Direct and         P. 02-709-7766
Confectionery                      and HRI   U.S. (1)              other importers    F. 02-790-8123
(Confectionery,                                                                       W. ht.co.kr
chewing gum, ice
cream)
Coca Cola Korea          334       Retail    Korea (3)             Direct and         P. 02-2259-5888
Bottling                           and HRI                         other importers    F. 02-2259-5593
(Soft drinks, other                                                                   W. cckbc.co.kr
beverages)
Orion                    316       Retail    Korea (3)             Direct and         P. 02-710-6000
(confectionery,                    and HRI   Japan (1)             other importers    F. 02-719-2582
chewing gum &                                                                         W. orion.co.kr
snacks)
Ottogi                   311       Retail    Korea (2)             Direct and         P. 02-528-1381
(ketchup,                          and HRI   Japan (1)             other importers    F. 02-528-1949
mayonnaise,                                                                           W. ottogi.co.kr
curry)



UNCLASSIFIED                                                   USDA Foreign Agricultural Service
GAIN Report - KS4011                                                             Page 7 of 17

Daerim Corp.           209     Retail     Korea (2)          Direct and other   P. 02-3470-6000
(Fish cake,                    and HRI    Chile (1)          importers          F. 02-523-8900
imitation crab                            Japan (1)                             W. daerimi.com
meat, pickled                             U.S. (1)
seafood, frozen                           China (1)
fish products,
dried fish cake,
fish sausage)
Shany                  196     Retail     Korea (3)          Direct and         P.   031-739-2000
(bread, ice cream)             and HRI                       other importers    F.   031-739-2011
Paris Croissant        190     Retail     Korea (2)          Direct and         P.   031-740-5500
(bread,                        and HRI                       other importers    F.   031-740-5520
confectionery)                                                                  W.   paris.co.kr
Samyang                183     Retail     Korea (11)         Direct and         P.   02-740-7114
(Sugar, edible oils,           and HRI    Japan (1)          other importers    F.   02-743-7720
premixes, wheat                           U.S. (1)                              W.   samyang.co.kr
flour)                                    Germany (1)
                                          Vietnam (1)
                                          Hong Kong (1)
Korea Nestle           181     Retail     Korea (1)          Direct and via     P. 02-590-0011
(Coffee, infant                and HRI                       other importers    F. 02-737-2295
formula,                                                                        W. nestle.co.kr
nutritional food)
Korea Yakult           176     Retail     Korea (3)          Direct and via     P. 02-3449-6000
(Instant noodle,               and HRI                       other importers    F. 02-3449-6655
fermented milk)                                                                 W. yakult.co.kr

Ottogi Ramyun          167     Retail     Korea (2)          Direct and via     P.   031-683-1811
(Instant noodles)              and HRI    Japan (1)          other importers    F.   031-683-1242
                                                                                W.   ottogi.co.kr
Namyang Milk           159     Retail     Korea (3)          Direct and via     P.   02-734-1305
(Processed milk                and                           other importers    F.   02-739-9689
products,                      HRI                                              W.   namyangi.com
beverages, tea)
Samyang Food           157     Retail     Korea (2)          Direct and via     P. 02-940-3000
(Instant noodles,              and HRI    U.S. (1)           other importers    F. 02-942-4350
snacks, soy sauce,                        China (1)                             W. samyangfood.co.kr
ice cream, milk)
Donga Otsuka           150     Retail     Korea (3)          Direct and via     P. 031-470-2114
(Beverages, soy                and HRI                       other importers    F. 031-470-0436
milk)                                                                           W. donga-otsuka.co.kr
Sales included only food products and packages, but meat products not included.
*P stands for phone number, *F for fax number and *W for Website.
Note: Country code for Korea is 82. The "0" of the city code is dropped when calling from
abroad.

D. SECTOR TRENDS

The Korean food and beverage manufacturing and processing industry is a major consumer
of imported raw materials, intermediate products, ingredients and additives. Imports are
necessary to support the processing industry due to limited local supply in terms of quantity
and variety. Over 70 percent of Korea’s food products are imported. The area of cultivated
land declined to 1,863,000 hectares in 2002, down more than 6 percent from 1,985,000
hectares in 1995, due mainly to the loss of farmland to ever expanding urbanization.

Korea has a diverse food-processing sector. Concurrently, Korean consumers exhibit a
tendency for nationally produced goods, while still seeking an expanding variety of products.



UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                             Page 8 of 17

Increased buying power, international travel and cosmopolitan living all lend to growing
demand for a diversity of locally produced food items.

Table 4. Output of Food Processing by Sector: 2002
Food Processing Sector                Gross output ($million)          Share (%)
Meat processing                                3,895                     10.9%
Grain processing                               3,691                     10.3%
Dairy & Ice cream                              3,535                     9.9%
Feed processing                                3,430                     9.6%
Alcoholic beverages                            3,030                     8.5%
Non-alcoholic beverages                        2,637                     7.4%
Fish and marine products                       2,449                     6.9%
Coffee, tea, soup & other foods                2,124                     5.9%
Bread & Grain preparations                     2,028                     5.7%
Seasonings, spices & Food additives            2,001                     5.6%
Noodles and similar products                   1,426                     4.0%
Cocoa & sugar confectionery                    1,086                     3.0%
Fats & Oils manufacturing                      1,066                     3.0%
Fruit & Vegetable Processing                   1,014                     2.8%
Sugar manufacturing                             676                      1.9%
Starch & Sweeteners manufacturing               637                      1.8%
Total                                          35,731                   100.0%


Most Korean food and beverage manufacturers are small-scaled companies. As of the end of
2002, there were 7,550 food, livestock, dairy and beverage manufacturing companies with a
labor force of five or more across Korea. Of these there are only 16 manufacturers with 500
employees or over as shown on the following table. Only 4 percent (304 manufacturers)
have 100 or more employees.



Table 5. Employment Size of Food and Beverage Manufacturers: 2002
 No. of Employees         No. of Manufacturers             Percent
 5-9                               3,718                   49.2%
 10-19                             1,810                   24.0%
 20-49                             1,291                   17.1%
 50-99                              427                     5.7%
 100-199                            198                     2.6%
 200-399                             54                     0.7%
 300-499                             36                     0.5%
 500 and Over                        16                     0.2%
 Total                             7,550                  100.0%




UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                            Page 9 of 17

Korea imports a wide variety of agricultural products for processing such as corn, soybeans,
wheat, essential oils, frozen concentrated orange juice, turkey meat, duck meat, almonds,
walnuts, powdered milk, whey powder, coffee, animal and vegetable fats and oils, beef tallow,
seafood, processed fruits and vegetables, coffee, potato products, vegetable oils and cocoa
products. In 2002, Korean self-sufficiency of rice is estimated at 107 percent, wheat at 0.2
percent, barley at 60.4 percent, soybeans at 7.3 percent and corn at 0.7 percent. In 2002
Korea imported 3.9 million metric tons (MT) of wheat valued at $543 million, 9.1 million MT
of corn valued at $988 million and 1.5 million MT of soybeans valued at $329 million. U.S.
suppliers have a strong opportunity to export raw materials or ingredients for use in food
processing in Korea.

Local eating habits have changed dramatically in recent years. A diet that had long been
based on rice became progressively more centered on wheat and protein. At the same time,
consumers sought more diversity and became more quality oriented. Consumption of fish,
fruits, vegetables, marine plants and edible oil increased. Consumer preferences also shifted
toward foods that were convenient to cook rather than those that require lengthy preparation.
At the same time, demand for greater quality in terms of flavor and nutrition increased, a
sharp departure from a diet that previously emphasized calorific content. Consumers
became more health and safety conscious in their food buying habit as ingredients,
packaging, shelf life and toxicity became important determinants of purchasing behavior.

Spending habits also became diversified as individual preferences and a wider variety of
foods became available to meet consumer demand. These shifts toward quality, variety,
convenience, safety and health resulted not only increased consumption of processed food,
but also stimulated the growth of the domestic food processing industry.

       Food Ingredient Processing

There are a total of 8 wheat flour millers with 11 plants in Korea. One hundred percent of
wheat for flour milling is imported mostly from the U.S., Australia, Canada, China, and India.
The flour market continued to expand with increasing per capita income and change of diet
from rice to wheat based food over the past decades. However, the wheat flour market grew
by about 2-3 percent annually until 1990's, but is now stagnant. Per capita consumption of
wheat in Korea was 37 Kg. in 2002.

No sugar is produced in Korea, so all raw sugar is imported. There are currently three sugar-
refining companies in Korea with a total annual production of about 1.3 million metric tons.
Sugar is widely used in food sectors, including confectionery, jam and jelly, powered milk,
bakery, cake, beverages and fruit based alcohol. Korea also exports about 35 percent of its
refined sugar production. The industry is expected to grow at about 2-3 percent annually for
the foreseeable future.

There are 4 companies in Korea which produce starch and starch syrup with corn as a raw
material. All the corn used in this sector is imported. The total amount of corn used in
starch and starch syrup production amounted to about 2 million metric tons in 2002.
Although this sector has not grown much compared to that of other sectors, there is much
room for U.S. sales to grow in the future. China has become the major corn supplier to
Korea but this trend may be changing as Chinese corn export policies are revised.

       Confectionary and Bakery

The Korean confectionery market increased by 8.8 percent to $1.7 billion in 2002 from $1.59
billion the previous year. This is big growth relative to other food processing sectors. By
category, the largest increasing was chewing gum, which jumped 33.4 percent, followed by


UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                          Page 10 of 17

chocolate (13.7 percent), pie (11.4 percent), biscuits (9.7 percent), and candy (7.6 percent).
Among the individual products, snacks were the biggest category with $483 million, followed
by cookies with $411 million, and chewing gum with $287 million. There were about 13,000
bakery shops across Korea in 202. However, the 5 top franchised and mass production
bakery companies, with about 2,400 shops, took a 31 percent share of the $2.5 billion
market in 2002.

       Non-alcoholic Beverages Processing

The non-alcoholic beverage segment grew by about 2 percent in 2002. By segment, the
carbonated beverage market increased to about $983 million, up from $967 million in 2001,
the juice market increased to $783 million, up from $767 million, and other beverage market,
including soy milk, water and sports water, increased to $967 million, up from $933 million.
The non-alcoholic beverage market is diversified, the product life cycle is shorter, the sector
requires diversified and complex marketing activities, and many new to market products are
developed every year.


       Dairy Processing

Korean society is rapidly adopting many aspects of Western societies, such as dual-income
families, fewer children, fewer family members, less time to spend on cooking, and dining
out with greater frequency. Increasing disposable incomes mean that Koreans can also
indulge their growing health consciousness and concerns about nutrition. The major dairy
companies are naturally adapting to meet the changing demands of their customers. Dairy
products are not just a foodstuff, but also offer health benefits.

Probiotic drinking yogurts, for example, appeal to a broad range of customers thanks to their
high nutritional values and convenience. Aggressive marketing efforts help to impress upon
the public the benefits offered by the product. Similar health benefits to those offered by
probiotic yogurts are expected to be extended to related dairy products like milk and cheese.
Consumers are willing to pay premium prices for health foods, so the dairy companies will
make great efforts to launch premium brands in the future with a focus on health benefits.

       Meat Processing

Total processed meat production in Korea was 157,230 metric tons, broken down to 60,200
tons of ham, about 40,400 tons of sausage, about 2,000 tons of bacon, 26,700 tons of
canned meat, and 28,000 tons of mixed sausages in 2002. Pork accounts for nearly the
entire sector. Meat processing has continued to grow since 1999, that is, up about 7 percent
in 1999, up 14 percent in 2000, up 10 percent in 2001 and up another 10 percent in 2002.

       Seafood Processing

Korea processed about 1.4 million tons of fish and seafood in 2002. Imported seafood
products are utilized for both domestic consumption and re-export. Seafood is imported into
Korea from many countries. Major suppliers include China, Russia, the United States, Japan
and Vietnam. In 2002, these five countries accounted for over 70 percent of total Korean
seafood imports on a value basis. In 2002, China became the largest seafood supplier to
Korea by exporting $711 million, followed by Russia at $214 million, the U.S. at $165 million,
Japan at $142 million, and Vietnam at $122 million. The major species imported to Korea in
2002 were yellow Corvina($138 million), Alaska pollack($90 million), hair tail($81 million),
Alaska pollack roe($80 million), shrimp($51 million), Alaska pollack surimi($49 million), and
poulp squid($40 million). All of the noted product was frozen.


UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                           Page 11 of 17


Table 6: Imports of Major Fishery Products: U.S. and the World: 2002 (US$1,000)
     Fish Species             From U.S.             From World
Pollack surimi, frozen           48,439                   48,772
Angler, frozen                   37,486                   69,990
Roes of Pollack, frozen          20,108                   80,174
Other surimi, frozen              8,730                   64,818
Hagfish, frozen                   5,529                   7,098
Other flat fish, frozen           4,832                   18,632
Alaska Pollack, frozen            4,468                   89,492
Cod, frozen                       3,469                   14,602
Angler, fresh                     2,925                   3,865
Atka mackerel, frozen             2,921                   13,117
Other roes, frozen                2,556                   7,227
Ray, frozen                       1,871                   12,052
Prepared sea cucumber             1,411                   4,892
Rock fish, frozen                 1,323                   9,646
Sable fish, frozen                 903                     919
Plaice, frozen                     881                    1,865
Sardines, frozen                   811                    5,928
Cod, fresh                         652                    3,425
Rock lobster, frozen               589                    3,796
Shrimps and prawns                 589                    51,482
other    than  peeled,
frozen
Pacific salmon except              565                    2,876
Sockeye
Source: Statistical Yearbook of Foreign Trade 2002




SECTION III. COMPETITION

The United States is the largest supplier of agricultural products to Korea with a 27.9 percent
market share in 2002. However, the U.S. competes with many other countries for many
products, such as, corn with China and Brazil, wheat with Australia, soybeans with Brazil,
red meat with Australia, dairy products with the EU, Australia and New Zealand, and fish with
China, Russia and Japan.

A brief review of imports by major product category follows. The market shares stated in
this section are based on 2002 Korean imports.

Table 7. Major Imports by Product Category by Origin: 2002
Product           Import         Major Supply           Strengths of          Advantages
Category          Market         Sources in 2002        Key Supply            and



UNCLASSIFIED                                            USDA Foreign Agricultural Service
GAIN Report - KS4011                                                      Page 12 of 17

                   Size in                            Countries          Disadvantages
                   2002                                                  of Local
                   ($Million)                                            Suppliers
Beef                   848      U.S. (70%)            U.S. strong in     Consumers
(HS 0201 &                      Australia (22%)       supplying all      state they
0202)                           New Zealand (5%)      types of cuts      prefer domestic.
                                                      due to price and   Local supplies
                                                      quality            are short.
                                                      competitiveness.
Pork                   206      EU (55%)              EU prices are      Koreans are big
(HS 0203)                       Canada (15%)          reasonable.        consumers of
                                U.S. (7%)                                pork and have a
                                Australia(2%)                            large pork
                                                                         production, but
                                                                         most of the
                                                                         feed ingredients
                                                                         are imported.
Poultry meat           102      U.S. (55%)            U.S. prices are    Avian flu broke
(HS 0207)                       Thailand(41%)         competitive in     in Korea.
                                China (2%)            case of chicken    Almost all feed
                                                      legs. Thai         ingredients are
                                                      prices are         imported.
                                                      competitive.
Fish and seafood      1,676     China (41%)           Chinese and        Shortages of
products                        Russia (13%)          Russian prices     local supply.
(HS 03)                         U.S. (10%)            are competitive
                                Japan (8%)            and are closer
                                Thailand (4%)         to Korea. U.S.
                                                      fish is high
                                                      quality.
Dairy products         147      EU (28%)              The prices of      Local production
(HS 04)                         Australia (26%)       EU, Australia      cost is high and
                                New Zealand (23%)     and New            most feed
                                U.S. (16%)            Zealand are        ingredients are
                                                      competitive.       imported.
Prepared fruits        215      U.S. (42%)            U.S. quality is    Local production
and vegetables                  China (28%)           high and prices    cost is high.
(HS 2001-8)                     Thailand (7%)         are competitive.
                                EU (5%)               Chinese prices
                                                      are low.
Sugar                  47       China (25%)           Chinese prices     All raw sugar is
Confectionary                   EU (21%)              are competitive.   imported in
products                        Japan (12%)                              Korea.
                                                      EU quality is
(HS 1704)                       U.S. (11%)
                                                      high.
                                Indonesia (8%)
Wines                  29       EU (75%)              Korean             Local production
(HS 2204)                       U.S. (15%)            consumers          is very little, if
                                Australia (5%)        accept French      any. More
                                                      wines as high      Koreans are
                                                      quality. U.S.      drinking wines.
                                                      wines are
                                                      becoming


UNCLASSIFIED                                        USDA Foreign Agricultural Service
GAIN Report - KS4011                                                  Page 13 of 17

                                                popular.
Tree nuts           28     U.S. (85%)           U.S. is a            No almond is
(HS 0801 &                 Australia (2%)       dominant             produced in
0802)                                           supplier of          Korea.
                                                almonds.
Bakery products     58     EU (29%)             U.S. and EU          Almost
(HS 1905)                  U.S. (28%)           biscuits, cookies    ingredients are
                           China (25%)          and crackers are     imported in
                                                high quality.        Korea.
Citrus products     95     U.S. (96%)           Tariff for oranges   Local production
(HS 0805)                  Australia (2%)       declined in 2004     of oranges is
                                                from 54.9% to        almost non-
                                                50%. U.S. is the
                                                                     existent.
                                                predominant
                                                supplier.
Fruit juices (HS   102     Brazil (42%)         Brazil is a stable   No FCOJ is
2009)                      U.S. (37%)           and cheap            produced.
                           EU (7%)              supplier of FCOJ
                           China (4%)           and the U.S.
                                                FCOJ is high
                                                quality.
Grains             1,605   China (45%)          Chinese corn         Except for rice,
(HS 10)                    U.S. (21%)           prices are           almost all
                           Australia (12%)      cheaper than         grains are
                           Brazil (9%)          those of             imported in
                                                competitors and      Korea.
                                                China is closer
                                                to Korea.
Oilseeds           391     U.S. (71%)           The U.S. is a        Shortage of
(HS 1201-7)                China (13%)          stable and high      supply in Korea.
                           Brazil (10%)         quality supplier.
Animal feeds (HS   102     U.S. (27%)           U.S. and EU pet      Almost all feed
2309)                      EU (26%)             foods are of         ingredients are
                           Australia (11%)      high quality.        imported.
                           China (8%)
Sauces &            74     China (44%)          Chinese sauces       Koreans have
condiments                 U.S. (17%)           are competitive      their own
(HS 2103)                  Japan (15)           in prices.           traditional
                           Australia (2%)                            sauces and
                           New Zealand (2%)                          condiments.
Coffee, tea and    104     China (17%)          Chinese prices       Korean prices of
spices                     Vietnam ((15%)       are competitive      red pepper are
(HS 09)                    Indonesia (11%)      in red pepper        high. Korea
                           Columbia (9%)        and Vietnam,         does not
                           Honduras (9%)        Indonesia,           produce coffee
                           Brazil (7%)          Columbia and         beans.
                           U.S. (6%)            Honduras are
                                                competitive in
                                                coffee beans.




UNCLASSIFIED                                  USDA Foreign Agricultural Service
 GAIN Report - KS4011                                                            Page 14 of 17

 Animal and              278       Malaysia (30%)          Malaysia is          Korean does not
 vegetable oils                    U.S. (21%)              strong in palm       produce palm
 and fats                          Argentina (17%)         oil, and U.S. is     oil, and does
 (HS 1501-18)                      EU (7%)                 strong in beef       not have many
                                   Indonesia (7%)          tallow, fish oils,   ingredients.
                                   Canada (5%)             soybean oil and
                                                           edible mixed
                                                           oils.
 Prepared meat           186       Vietnam (18%)           Vietnam is           Korea does not
 and seafood                       China (16%)             strong in            have enough
 (HS 16)                           Thailand (14%)          prepared jerk        raw materials
                                   EU (14%)                filefish, China is   and Korean
                                   U.S. (11%)              strong in            prices are high
                                   New Zealand (4%)        prepared fish        compared to its
                                                           and Thailand is      competitors'.
                                                           strong in
                                                           prepared
                                                           shrimps and
                                                           chickens.
 Chocolate               93        U.S. (34%)              U.S. is strong in    Korea does not
 products                          EU (28%)                medium quality       produce cocoa
 (HS 1806)                         Australia (11%)         chocolate            and its
                                   Turkey (6%)             products and EU      processed
                                   China (4%)              is strong in high    chocolate
                                   New Zealand (3%)        quality              products are
                                                           chocolate            expensive and
                                                           product.             not high quality.
 Ice cream               10        U.S. (60%)              U.S. is strong in    Korea does not
 (HS 2105)                         EU (36%)                high quality ice     produce high
                                   New Zealand (4%)        cream.               quality ice
                                                                                cream.

 SECTION IV. BEST PROSPECTS

 Korea imports a wide variety of agricultural, food, fishery products and ingredients for
 domestic consumption, and also re-exports some final product to other countries after
 importing raw and/or semi-finished ingredients and manufacturing them in Korea. The
 following are products which have presence in Korea and have good increased sales
 potential to the processing sector




 Table 8.Category A: Products Present in the Market Which Have Good Increased Sales
                      Potential
Product   2002      2002        5 Yr. Avg. Import        Key Constraints Market
Category Market     Imports     Annual       Tariff Rate over Market     Attractivenes
          Size      Volume:     Import                   Development     s for U.S.
          (1,000    (1,000 mt) Growth
          mt)       Value:      Total:
                    ($ Million) U.S.:




 UNCLASSIFIED                                           USDA Foreign Agricultural Service
   GAIN Report - KS4011                                                            Page 15 of 17

 Red meat       1,359       109      34.80%       Beef: 40%    Consumers state U.S. strong in
                           $1,054    44.80%       Chilled      they prefer     supplying all
                                                  Pork:        domestic.       types of cuts due
                                                  22.5%                        to price and
                                                  Frozen                       quality
                                                  Pork: 25%                    competitiveness.
 Poultry         386        439      44.30%       *18-20%      Not manually    Price-competitive
 Meat                       $101     51.30%                    trimmed.        in case of chicken
                                                                               legs

 Citrus          880        109      36.50%       Orange:      High tariff ratesTariff for oranges
                                     35.70%       50%          and quality      will decline in
                            $95                                variable.        2004 from
                                                  Grapefruit &                  54.9% to 50%.
                                                  lemon:                        U.S. is the
                                                  30%                           predominant
                                                                                supplier.
 Offals &        NA          69      44.30%       Offals:      Not easy to meet Product not
 Guts                       $137     47%          18%          local importers' consumed
                                                               specifications   domestically in
                                                  Guts:                         the U.S., but
                                                  27%                           demand in Korea
                                                                                for food use is
                                                                                quite high and
                                                                                steady.
 Chocolate    $293 mil       31      19.50%       8%           Low image for    Competitive in
                            $93      22.40%                    design and       prices and design
                                                               quality for high for medium
                                                               quality product  quality products
 Frozen and      NA         151      14.30%       *8-30%       High prices      U.S. product is
 Processed                  $121     30.80%                    compared to      considered high
 Vegetables                                                    competitors      quality

 Wine            NA          12      52%          15%          Fewer varieties Consumption is
                            $29      60.80%                    than French;      growing rapidly
                                                               higher prices
                                                               than Chilean and
                                                               Australian wines
 Fish and       3,212      1,110     40%          *10-20%      US prices are     Good quality
 Seafood                   $1,820    21.90%                    higher than those
                                                               of competitors

 Almonds          5          5       8.30%        8%          Demand is          High profile and
                            $17      7.70%                    limited            high quality
 Sauces           NA         54      21.90%       8%          US bottles are a High quality
                            $74      13.40%                   little too big for
                                                              consumers.
  *The tariff rates are different depending upon the product, and for some fish there are
  adjustment tariffs, which are a lot higher than the above. For accurate tariff rates, please
  contact ATO Seoul.

   SECTION V. KEY CONTACTS AND FURTHER INFORMATION
For further information about the Korean agricultural market, please contact:




   UNCLASSIFIED                                             USDA Foreign Agricultural Service
GAIN Report - KS4011                                                            Page 16 of 17

U.S. Agricultural Trade Office
Korean Address: Room 303, Leema Building, 146-1, Susong-dong, Chongro-ku
Seoul 110-140, Korea
U.S. Mailing Address: US Embassy Seoul, Unit 15550-ATO, APO, AP 96205-5550
Telephone: 82-2 397-4188          Fax: 82-2 720-7921
E-mail: atoseoul@usda.gov        Website: www.atoseoul.com

Agricultural Affairs Office
Korean Address: U.S. Embassy, 82, Sejong-ro, Chongro-ku, Seoul 110-140, Korea
U.S. Mailing Address: US Embassy Seoul, Unit 15550-AgAff, APO, AP 96205-5550
Telephone: 82-2 397-4297          Fax: 82-2 738-7147
E-mail: agseoul@usda.gov

For more information on how you can register for USDA/FAS’s Supplier List:

The United States Department of Agriculture’s Foreign Agricultural Service (USDA/FAS) offers
information and services that can be beneficial to both new and experienced exporters. For
example, the U.S. Suppliers Service is a searchable database of over 5,000 U.S. exporters
and their products, which is used by USDA/FAS to help facilitate connecting potential buyers
with U.S. suppliers. This database is used by more than 85 USDA FAS Overseas offices, such
as the ATO in Seoul, Korea, to help export agents, trading companies, importers and foreign
market buyers locate U.S. suppliers. It is also used to recruit U.S. exporters to participate in
market development activities sponsored by USDA and federal export programs.

You      can      register     online      for                    this        service         at
http://www.fas.usda.gov/agexport/exporter.html

AgConnections Team
AgExport Services Division, Foreign Agricultural Service, Washington, DC
Phone: 202-690-4172                  Fax: 202-205-2963
E-mail: joyce.estep@fas.usda.gov      Website: www.fas.usda.gov/agx/agx.html

For further information about sanitary and phytosanitary requirements, please
contact:

U.S. Animal Plant and Health Inspection Service
Room 303, Leema Building, 146-1, Susong-dong, Chongro-ku, Seoul 110-140, Korea
U.S. Mailing Address: USDA-APHIS, US Embassy Seoul, Unit 15550, APO, AP 96205-5550
Telephone: 82-2 725-5495           Fax: 82-2 725-5496
E-mail: aphis@kornet.net           Website: www.aphis.usda.gov

For information about activities by Strategic Trade Regional Groups, please
contact:

Mid-America International Agri-Trade Council (MIATCO)
400 West Erie Street, Suite 100, Chicago, IL 60610
Telephone: 312-944-3030             Fax: 312 944-1144
E-mail: eriggs@miatoco.org
Website: www.miatco.org

Western United States Agricultural Trade Association
2500 Main Street, Suite 110, Vancouver, WA 98660-2697
Phone: 360-693-3373       Fax: 360-693-3464
E-mail: bruce@wusata.org


UNCLASSIFIED                                             USDA Foreign Agricultural Service
GAIN Report - KS4011                                                       Page 17 of 17

Website: www.wusata.org

Eastern United States Agricultural & Food Export Council
150 S. Independence Mall West, 1036 Public Ledger Building, Philadelphia, PA 19106
Phone: 215-829-9111         Fax: 215-829-9777
E-mail: jcanono@foodexportusa.org
Website: www.foodexportusa.org

Southern United States Agricultural Trade Association
2 Canal Street Suite 2515, New Orleans, LA 70130, USA
Phone: 504-568-5986         Fax: 504-568-6010
E-mail: jim@susta.org
Website: www.susta.org

For information on the commercial and industrial products in Korea, please contact:

Foreign Commercial Service
Korean Address: U.S. Embassy, 82, Sejong-ro, Chongro-ku, Seoul, Korea
U.S. Mailing Address: US Embassy Seoul, Unit 15550-FCS, APO, AP 96205-5550
Telephone: 82-2 397-4535    Fax: 82-2 739-1628
E-mail: Seoul.office.box@mail.doc.gov Website: www.buyusa.gov/korea




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UNCLASSIFIED                                         USDA Foreign Agricultural Service

								
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